Lego Group, Marketing and Operation Management Report

FOUNDATIONS OF counseling (PART A) LEGO pigeonholing food grocery storeing and Operations Man historic periodment Report Prep atomic number 18d For LEGO Group By Eva Gaal On 17 November 2008 Introduction At the request of the LEGO Company, this typography advises the fellowship on the elaboration of its operation based on food securities industry class, appropriate market mix, new intersection point programme and culture, including total flavor management for verbotensourcing new partners. LEGO Group is the fifth- vastst toy manufacturer of the world and has operated success in full for 75 years however, it has had round problems in the last couple of years.To mould these problems, LEGO introduced a seven-year strategy plan, which consists of some fundamental changes regarding to the processes, procedures and structure of the company. This strategy so far has been executed successfully as shown in the financial results however, LEGO is qualifying to face some more ch on the wholeenges in the future. (LEGO Annual Report 2007, 2007). 1. / grocery store sectionalization grocery store segmentation is defined as the subdividing of a market into distinct and increasingly homogeneous subgroups of customers (FM-A, 2004, p. 3) and it centres on the assumption that customers register heterogeneousness in their harvest-time preferences and buying behaviour. (Green, 1977, Wind, 1978, cited in Dibb, 1998, p. 394). The business did actively segment its market (Dibb, 1998, p. 399), as LEGO determine itself from the very beginnings as a toy manufacturer it thus automatically determined its marketing segmentation blast. In the childrens toy market the primary segmentation base is the age (the older the more mazy product) however, the real buyers are the parents (e. g. LEGO Duplo). Such an access code is popular beca utilisation it is convenient, clear-out, easy to implement and stable over time. (Curran and Goodfellow, 1989, p. 23, cited in Dibb , 1998, p. 399). During the company operation LEGO identified more and more secondary segmentation variables (FM-A, 2004) such as gender (dollhouse for girls LEGO Belville and robots, football stars for boys LEGO Sports, LEGO Racers), geographical area level of in sleep with and purchase power (matured countries more complex products exchangeable Technic, Bionicle, developing countries simple products like Duplo, Creative Building) education ( varied product rages for classroom education and for child education at home) psychographic, lifestyle reflects the parents believe in the importance of education and creativeness of the LEGO products LEGO related its products directly to this segmentation group and positioned them in the certain markets. wherefore is market segmentation important? Identification of market segments, physical product configurations and shit positioning (LEGO positioned itself as a premium brand) are the approximately important decisions that compa nies face in the global market fanny. (Hassan et al. , 2003).LEGO identified country-wide segments and targeted them with its products persist, based most the importance of education and creativity. Universal segments across country boundaries are considered as micro factors for values, attitudes, lifestyle and perception. (Hassan et al. , 2003). Even if market segments foot be identified as LEGO did, it does not necessarily mean they are attractive or that a choke marketing mix ignore be be aftered for each segment. This can be one understanding why LEGO had difficulties in early 2000, however, there is a lack of quantifiable evidence rough the impact of segmentation on business performance. Dibb, 1998, p. 396). The an new(prenominal)(prenominal) reason could be that despite the well documented bene explosions which segmentation offers, businesses continue to represent murder difficulties. (Dibb, 1998) Marketers are using intuition rather than administrationatic abstr act to fall upon segments (Wind and Cardoza, 1974, cited in Dibb, 1998) follow their competitors (LEGO started to create high- tech toys) with the lack of particular analyses about their attractive feature to the business. By recommendation it is that LEGO should review its segmentation approach including identification of segment profitability and life cycles (see supplement 1. collection of segments data global buyer based vs country based features and so on to observe new market opportunities and niches. Although there is a lack of quantitative look on the question of segmentation success factor, there are guidelines that basin 3 part (before during aft(prenominal)) segmentation process, Kotlers check-list and attractiveness criteria (Abratt,1993, cited in Dibb, 1998), (see Appendix 2. ). The result of this analysis should then be applied in the victimization of the alive segments (e. g. argeting older age-groups 20+, enter into new markets e. g. in Asia or identif y new segments) to make decisions about targeting and to determine positioning. (Dibb, 1998). 2. / merchandise motley After the market has been successfully segmented, target segment selected, and positioning strategies created, the vender needs to proceed with development of the marketing mix. (Goldsmith, 1999, p. 181). The marketing plan consists of the eighter main elements below which are the major areas to achieve and expand the gross changes and profit goals (see Appendix 3. ).Some of them are uncomparable for Technic products (like product &038 price) yet some of them cannot be separated as they are associated to the brand (cost-effectiveness). fruit LEGOs vision is that the Group will increasingly refine and remedy its product range to enable its new product range to compete (LEGO Annual Report 2007, 2007), for example with the many electronic toys on the market, other companies are determined to reach buyers. Therefore in the 1970s LEGO started to dismiss the Ex pert Builder sets, which included parts like gears, axles and cogs, which could be employ to build meeting baby-sits of vehicles and machines (e. . cars, trucks, tractor etc. ). These products were more advanced, thence more suitable for teenagers (12+). They were designed to help children learn creatively through play and to remediate abilities to solve complex problems. In the 1980s the Expert Builder series was renamed to the Technic series. (Regani and George, 2007). By the early 1990s high-tech toys appeared in the market from other companies. Therefore the LEGO Technic series had to be improved to build robots and other machine-controlled or interactive systems to keep up with its competitors. PriceLEGOs unique position is based on the high look, durability and safety of its products, utilizing a premium branding strategy where a higher price is associated, which therefore differentiates LEGO in relation to its competitors within the current market. The Technic products consist of more complex and special elements, therefore the labor cost is higher than the standard bricks. nodes are prepared to pay this higher price to get the added benefits of the special design product of LEGO. However, this higher price (? 60-? 120) completely fits into the LEGO products price range (? 20-? 200). localize LEGO uses the following channels to provide their products (including LEGO Technic products) to customers (LEGO Annual Report 2007, 2007) distribution dickens centres in North America, two centres in Europe direct sale brand stores, mail order business, online sales (e. g. Amazon) publicity The LEGO brand is the one-sixth most well known brand in the world (HVG, 2004) and this gives agonistical advantage against the competitors in the promotion activity. LEGO is using to boost the Technic products through advertising during TV children programs (e. g. Off Roader) and through sales promotion (e. g. pecial online offers, Technic Gallery). Increasingly, online reviews written by satisfied customers are used to promote their products. Other possibility to promote Technic products would be to build one of them in the brand store to demonstrate how it works. People Not only in the production possess LEGO retained a high type, but too in the performance of the proceeds for customers. By TECHNIC products is very important that appropriate training for employees is given due(p) to the complexity of the products. Processes Lego products have to satisfy all market standards regardless where they were manufactured. (Regani and George, 2007, p. 6). It also has to provide high grapheme technical confine especially such a complex product as Technic and customer return. LEGO customer religious service was thus awarded the prize for Best Centre for Customer Service in Europe. (LEGO Annual Report 2007, 2007, p. 19). Physical evidence The high quality production of the LEGO product (ISO 14001) guarantees that the Technic toys can be ea sily assembled following the technical instruction manual(a)(a) and there are no missing parts and all elements fit perfectly well together. The assembled toy looks and works exactly as shown on the packaging.Personalisation As the newest element of the marketing mix, personalisation offers a personalized version of the brand. This has a direct impact on all other elements relevant to LEGO products. Customers who are unhappy with mass produced products can design their own individual TECHNIC product on the internet and order this more personalised version online. However, personalised products may imply personalised prices. (Goldsmith, 1999, p181. ). 3. / New product design development It may be easier to develop a personal version of an existing product than to develop a wholly new product.New products come in five versions product values, line extensions, brand extensions, new brands, and new-to-the-world innovations. (Peter and Donnelly, 1997, p. 125, cited in Goldsmith, 199 9). From the very beginning LEGO shows a high commitment to new products innovation. When LEGO created the premier non-toxic (ABS) interlocking plastic bricks in six different colours and launched their low yellow minifigure these were new innovations and built a base of their success as LEGO was named Products of the Century by Fortune magazine.The LEGO elements which have been manufactured since 1958 are fully compatible, therefore LEGO sets can be passed on from one generation to the next. (Regani and George, 2007). As childrens interests changed over the years LEGO had to design new high tech product ranges to keep up with the present technology. The product development takes place primarily at the companys Billund headquarter (internal brainstorming), but the LEGO Group has bases all over the world to proctor the latest trends, review of competitors products and also monitor the customers requirements and feedback. LEGO Company write, 2007). Innovation and creativity can be expensive and LEGO has separate of primary limitations of its product design therefore each design woof must be evaluated and assessed against a set of design criteria. (FM-A, 2004). The new products have to come after with the existing ones. The new product has to fit to the production line, because to queue or create a new production process has a high additional cost. LEGO Groups motto Only the trounce is sizeable enough and to fulfil this ambition all products have to comply with the appropriate safety and quality standards.Several activities such as quality management, environmental (green) issues, halt action and testing on mechanical, chemical, electrical properties to manipulate the product is free from hazards. Along with the high tech and licensed products LEGO should and so must concentrate on the development of its classic product lines (e. g. contour of product line extensions which are fit with the existing ones and wide range of possibilities of packaging (smaller supplementary parts are relatively cheaper for customers than bigger packs, etc. ). 4. / broad(a) quality management for new outsourcing partners It has a lot of elements therefore hard to find the right definition of TQM. There are some interpretations which concentrate on different aspects (FM-A, 2004) like participation and quality circles (IshiKawa), quality cost, employee participation and motivation (Crosby), internal and external focus of customers, fitness for use (Juran) and six Sigma (see Appendix 4. ). One of the overall definitions of TQM is n effective system for integrating the quality development, quality maintenance and quality improvement efforts of the various(a) groups in an organisation so as to enable production and service at the most economical levels which allow full customer satisfaction. (Feigenbaum,1986, cited in FM-A, 2004, p. 380). As definitions are wide and different in the practice the TQM is different company by company, however we could f ind some basic statements. LEGO is a good example of TQM as quality is the core of LEGOs activity. look is firmly rooted in our fundamental beliefs, or mission statement, or strategy goals, and our values.As a world leader in the topic of quality experience, service, and products, we focus on the customers perception of quality. (Regani and George, 2007, p. 6). In reflects of competitiveness and being cost-effective, it was a strategic decision to outsource its large production to Flextronics. However, outsourcing includes risks can the quality and the time-management (JIT) be assured? What are the essential factors of the LEGOs successful TQM which they should absolutely recommend to their outsourcing partners? Participation commitment at all levels Both parties have to participate to successful quality management. major(postnominal) and middle managers Should avoid Should consider autocracy support individualism squad building (team spirit) restrict behaviour training E mployees Employees involvement improves morale. (FM-A, 2004). We view the implementation of this policy as the shared responsibility of all LEGO employees. (Regani and George, 2007, p. 6). Culture strike a quality-conscious philosophy as LEGOs motto The best is good enough Organizational culture, LEGO established e. g. a department for Corporate eccentric Control Training give training on the job self-improvement to be proud of their jobs. (FM-A, 2004). LEGO implemented a new competence model which defines the eight most important competences for LEGO employees and regularly asking their workers about their tactual sensation of the process. Continuous improvement Quality management is the continual examination and improvement of xisting processes. (FM-A, 2004, p. 382). Not enough to introduce but also need to contribute the continuous improvement. As LEGO meets the highest quality standards they independently show how changeable the market is. LEGO takes care to stay u p-to-date in the safety requirements (EU CE, ISO). Monitoring (including preventive activities) LEGO quality management aim to prevent defective production (18 out of every million elements are defected) therefore have to assure quality in the production process internally and externally (quality assurance), rather than inspecting goods after they have been produced. FM-A, 2004). Although the high quality production which avoids defaults LEGO carries out regular inspections of production. What can LEGO provide the company they outsourced to with? Documentation A company quality manual may summarise the quality management policy and system. A procedures manual sets out the functions, structures and responsible for quality in each department. Detailed work instructions and specifications for how work should be carried out show how to achieve the want quality standards. Training Integrated relationship (training in LEGOs place) experience sharing train the trainer program (LE GO provide trainers) Monitoring LEGO can delegate people from its monitoring team. Summary and conclusions Following the seven-year-strategy plan in the last couple of years, LEGOs situation has already stabilized. The further expansion of the operation is possible. LEGO needs to rethink their attractiveness of the market segments and approach them to identify new market opportunities and niches.By actively using the appropriate elements of marketing mix (not only the classical 4Ps) and thinking about the product design possibilities they should also consider the existing competitive advantages of their product and the cost of fitted to the process involved. In case of outsourcing as a cost-saving LEGO needs to support its partners to keep up the quality as LEGOs core value. REFERENCES Abratt, R. (1993) Market segmentation practices of industrial marketers. industrial selling Management, Vol. 22, pp. 79-84. Cited in Dibb S. (1998) Market segmentation strategies for success. mark eting apprehension &038 Planning, 16/7, 1998, pp. 394 406. Curran, J. G. M. and Goodfellow, J. H. (1989), Theoretical and practical issues in the intention of market boundaries. European Journal of selling, Vol. 24 No. 1, pp. 16-28. Cited in Dibb S. 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Six Sigma pic &8212&8212&8212&8212&8212&8212&8212 Segment profitability and life cycle Turnover Year 1970 1990 1958 2008 LEGO Brick LEGO Technic LEGO friend Wars Substantial Accessible Measurable Stable Actionable Expected market growth Compet itive position Market size Market fit with organisational objectives and resources Personalisation Product Price People Processes Place Physical evidence Promotion The Marketing Plan Defect reduction Yield improvement Customer delight Profitability improvement